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By XE Market Analysis August 16, 2017 2:57 pm
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    XE Market Analysis: Asia - Aug 16, 2017

    The dollar was relatively steady through the morning session, though took a late hit following news the president's policy forum is disbanding, taking EUR-USD to 1.1776 from near 1.1690, and USD-JPY to session lows of 110.15 from near 110.80. Wall Street pared gains in the wake of the announcement, as yields stayed down. The dollar fell further after the FOMC minutes, where the committee was split over the path of future interest rate increases due to concerns over low inflation.

    [EUR, USD]
    EUR-USD was range bound through the morning session, managing just a 1.1720 to 1.1682 trading band. The disbanding of the Trump business councils, along with dovish tilting FOMC minutes later took the pairing to 1.1776 highs. The Fed voiced concerns about low inflation, and will be split on the timing of rate hikes going forward.

    [USD, JPY]
    USD-JPY held up through the morning session, finding support under 110.70, though unable to seriously test the 111 handle after topping at 110.94. Later, the combination of uncertainty provided by news that Trump's business councils would be disbanded, and dovish sounding FOMC minutes, saw the pairing fall to 110.20 lows. A close under the 20-day moving average at 110.56 could be a bearish signal near term.

    [GBP, USD]
    Sterling traded lower versus the dollar in N.Y., basing at 1.2843, a new one-month bottom. The pound earlier came within a few pips of breaching its post Brexit lows versus the euro before the common currency took a broad trip lower. The pound has lost nearly 11% of its value relative to the euro over the last four months. The relative GDP performance of the UK versus the Eurozone economy's best shines a light on the causes of this exchange dynamic, with the UK posting Q1 and Q2 growth figures of 0.2% q/q and 0.3% q/q versus the Eurozone's 0.5% q/q and 0.6% growth outcomes. With significant Brexit uncertainties remaining, we expect more to come of this trend.

    [USD, CHF]
    EUR-CHF failed to sustain recovery gains to 1.1500, instead stalling short of the level and then settling into 1.1360 lows after dovish FOMC minutes. Recent price action seems to affirm a new-found confidence to short the franc, which has hinged on improving sentiment about Eurozone's economy and political viability. Up until recently even the enticement of a -0.75% deposit rate had failed to entice sustained franc shorting, which would be welcome by the SNB, which has long-since battled what it characterizes as a "significantly" overvalued currency. We are looking for EUR-CHF to eventually "close the gap" by returning to the 1.2000 level, which had been the SNB's floor until abandoning it in January 2015.

    [USD, CAD]
    USD-CAD was relatively heavy through the North American session, ranging between 1.2740 and 1.2692. Risk-on conditions and relatively firm oil prices continued to cap gains, while prospects for further BoC tightening should keep the pairing in a sell-the-rally mode for the foreseeable future. The pairing later shrugged off the latest oil price downdraft, edging under 1.2700 despite WTI crude's fall of $1/bbl from earlier highs, to $46.84 lows. General USD weakness appeared to be the driver, as the DXY fell from 94.10 to 93.80 after the Trump Council news.

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